Two big U.S. banks, Bank of America Corp. (BAC) and Wells Fargo & Co. (WFC) announced rate cuts on overdraft fees charged to customers. BAC Shares closed at $49.21 and WFC Shares closed up 1.3% at $56.06 on January 11.
Cutting Overdraft Fees
The Consumer Financial Protection Bureau (CFPB) is set to issue new guidelines to limit the banks’ dependence on overdraft fees to boost their top lines.
In an attempt to ease pressure on consumers and to encourage their saving habits, both BAC and WFC have decided to cut overdraft fees charged to customers on their checking accounts. The banks are also revising policies for these charges to make the service more affordable.
Bank of America said it is reducing the overdraft fees to $10 from $35 starting May and also removing the fees charged to customers for non-sufficient funds (NSF) in February.
Wells Fargo Policies
Wells Fargo has announced certain other relaxations too, effective from March 31, 2022. The bank aims to eliminate overdraft fees for customers who use funds from a linked account to cover transactions on the customer’s checking accounts. This service is available to customers enrolled in its Overdraft Protection service.
Additionally, the bank will completely eliminate fees charged for NSF in the deposit account. Customers will also have earlier access to direct deposits up to two days earlier, which will come into effect from the third quarter.
Customers who overdraw their accounts will have up to 24 hours to refund their accounts to avoid overdraft charges. This service will be available effective third quarter as well. Another service that will start by the end of 2022 is a short-term loan of $500, for qualified customers. This loan can be repaid along with a flat processing fee through monthly installments.
Bank of America’s President of Retail banking, Holly O’Neil, said, “These latest steps will further support our clients and empower them to create long-term financial wellness… We remain committed to taking actions that will further bring down overdraft fees in the future and continue to empower clients to drive positive changes to behavior pertaining to overdraft.”
CEO of Wells Fargo Consumer and Small Business Banking, Mary Mack, said, “Today’s changes are meant to improve our customers’ experience with Wells Fargo and make it easier for them to manage their bank accounts… Embedding the customer perspective directly into our decision-making has been a consistent focus for Wells Fargo over the past several years. As a company, we’ve made changes to products and services, we launched the Office of Consumer Practices one year ago, and we will continue to maintain this focus as our company’s transformation continues.”
Wall Street View
Recently, Jefferies analyst Ken Usdin lifted the price target on the WFC stock to $64 (14.2% upside potential) from $59, while maintaining a Buy rating.
The Wall Street community is cautiously optimistic about the stock with a Moderate Buy consensus rating based on 11 Buys and 4 Holds. The average Wells Fargo price target of $56.62 implies 1% upside potential to current levels.
TipRanks’ Website Traffic tool, which uses data from SEMrush Holdings (SEMR), the world’s biggest website usage monitoring service, offers insight into WFC’s performance, one of America’s best bank stocks.
In December, Wells Fargo website traffic recorded a 6.42% year-over-year decrease in monthly visits. However, year-to-date website traffic growth increased by 5.81% compared to the same period last year.
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